Charles imo is simply stating the obvious, if the tax base were bigger becuause internet multi nats were paying their VAT in this country then rates and other taxes would be lower. These guys arguably haven't worked out a more efficient business model, merely a better tax scam.
Well, I think they have done both. It's pretty obvious that to have all the CDs in the world in a big warehouse on an industrial estate somewhere and an online catalogue, is more efficient than having a relatively small selection of the world's CDs in an expensive high street shop staffed by expensive staff. Also - people seem to like to be able to buy stuff online. It means I can spend my weekend in the pub rather than shopping :-) And as another example I can get single estate coffee of the type you could only get in a few specialist shops in the past (that's an unsolicited plug for www.hasbean.co.uk by the way).
The answer is to make sure our tax laws make it profitable for people to set up Internet businesses and sell to, er, Luxemburg I suppose, and hopefully bigger places.
why should internet cos. have a stable market, access to consumers, an enforceable system of law and payment and the pass the cost of providing this infrastructure on to their competitors through tax avoidance ?
They shouldn't, but Charles specifically stated we should find a way of charging them the equivalent of business rates - which to me seems to simply penalise them for finding a more efficient business model than bricks & mortar in the high street. Their competitors should either move online or find a business model that encourages both footfall and in-store spend. The high street of he future will probably be half to a quarter the size it is now, there seems to be no point trying to keep it going.
Charles imo is simply stating the obvious, if the tax base were bigger becuause internet multi nats were paying their VAT in this country then rates and other taxes would be lower. These guys arguably haven't worked out a more efficient business model, merely a better tax scam.
He isn't stating the obvious - he wants companies that have no shops to pay rates on them - the ultimate in restrictive practices - the issue of where a company has its headquarters re corporation tax is a different matter.
The argument isn't just corporation tax it's VAT. Amazon had sales on £3bn in the UK and has the joy of seeing SMEs fund it's obligations as company working in a developed and stable market.
Ed Miliband, knowing he has the electorate on his side, has chucked a hand-grenade into the cosy and powerful world of Big Business/Tory Party/Energy Companies.
At the moment, he's sitting back and chuckling at their panic, waiting to see how they respond.
It suddenly struck me that that phrase is one that foreigners must fund terribly difficult to comprehend. At first glance it looks like it is exactly the same construction as "Carthage must be destroyed"... but no it isn't. You are not commanding the evisceration of an entire species of flightless birds.
What's obvious to me is that the reason Ed barely mentioned his new, tough position re the unions is because he read out their preferred conference speech. He is their man.
BBC @ 10 fairly unhelpful for Ed I thought: images of lights going out and a big emphasis on economic uncertainty. I'm quite surprised how negative it is...
BBC @ 10 fairly unhelpful for Ed I thought: images of lights going out and a big emphasis on economic uncertainty. I'm quite surprised how negative it is...
Charles imo is simply stating the obvious, if the tax base were bigger becuause internet multi nats were paying their VAT in this country then rates and other taxes would be lower. These guys arguably haven't worked out a more efficient business model, merely a better tax scam.
Well, I think they have done both. It's pretty obvious that to have all the CDs in the world in a big warehouse on an industrial estate somewhere and an online catalogue, is more efficient than having a relatively small selection of the world's CDs in an expensive high street shop staffed by expensive staff. Also - people seem to like to be able to buy stuff online. It means I can spend my weekend in the pub rather than shopping :-) And as another example I can get single estate coffee of the type you could only get in a few specialist shops in the past (that's an unsolicited plug for www.hasbean.co.uk by the way).
The answer is to make sure our tax laws make it profitable for people to set up Internet businesses and sell to, er, Luxemburg I suppose, and hopefully bigger places.
Well we can get in to the economics but I doubt holding all the stock in one place is the most efficient model, otherwise amazon wouldn't be building lots of distribution centres. The issue as ever is it depends as people can pick and choose to suit themselves. What I think is fundamentally wrong is the tax avoidance associated with it. With UK sales of £ 3bn amazon should be paying about £600m to the exchequer and then chip in on its profits say £ 100m. Claiming that it sells in Luxembourg and that the UK is only a delivery arm is a scam.
"Our" energy companies in the way that they're the only ones that sell us energy.
They sell us energy for extortionate prices, as a cartel.
They try to make a profit so that they could be in a position to make the vital investment in the infrastructure for our energy supplies. Do you want them to lose money?
"Amazon killed the DVD retail market by shipping their product from Luxembourg and avoiding the need to charge VAT. They used this to undercut prices, keeping the upside for themselves and causing significant job losses and social costs for the UK tax payer."
I don't deny that, I said so in my post, they have aggressively targeted the market...I am just saying that it is wrong to lump them with many of the other players when it comes to talking about making massive returns.
Analysis of mark-up on a cup of Starbucks, shows a very healthy margins (which don't seem to reflect in the profits declared in the country of sale)....as stated in the piece, Amazon is operating on razor thin margins.
As for killing the rental DVD market...you are having a laugh right? The rental DVD market has been killed by the internet!!!
Point of order: RETAIL not rental. Been to Woolies or HMV recently?
My issue is that they have won market share (fair play) by taking advantage of a 20% price differential due to a tax arbitrage. Why does the government favour one business model over another?
I'm still trying to work out how a business with razor thin margins can keep opening multi million pound warehouses and make massive investments in stock.
Partly economies of scale - vast volumes, low margins. Partly because (in the US at least) they build their warehouses in backwaters where land is cheap and local governments keen to subsidise. And I believe a bunch of their stock from the publishers is on a consignment basis anyway.
What % growth does your desperate CoE need in the next twenty months for you to proclaim living standards higher than 2010. After all, you inherited a growing economy in the 3rd quarter of 2010.
Pillock, borrowing isn't wealth creation, it's debt. It's not wealth until we pay it back and it doesn't matter whether it's Labour or Conservatives doing the debt bingeing it's not growth.
I have a prepay electricity device because I can't guarantee that the money will be in my account for a monthly bill (I'm that poor), but I understand that it has to cost more. There's a third and a fourth party involved - the company that runs the system that allows me to go to my local shop to buy electricity, and the local shop. If I didn't pay the premium I do, I'd be getting my electricity at a massive discount compared to everyone else.
The prepay meter is awful and I hate it, but it's not really unfair.
Yes of course they can go down, and they sure as hell will if someone who could be PM in 20 months explicitly says he's out to shaft you ( and part of my and probably your pension scheme went south today too as a result - thanks Ed). Wouldn't be surprised if Redrow and Barrett took a hit too ( if they are traded). The land is part of their balance sheet and stock in the same way that our chunks of metal are at work. Does Ed propose auditing our stock and declaring we are not using our billets fast enough for his liking so he's going to use the power of the state to tell us what to do with them?
You also are not going to build 200k homes by shafting the very folk with the wherewithal and know how to do it.
My issue is that they have won market share (fair play) by taking advantage of a 20% price differential due to a tax arbitrage. Why does the government favour one business model over another?
Doesn't Luxemburg charge VAT on CDs then?
My understand was it was a much lower rate (1-2%) if at all. But Amazon puts all their European volume through it - effectively the Duke is just skimming a bunch of money.
Claiming that it sells in Luxembourg and that the UK is only a delivery arm is a scam.
So can't we change the VAT laws? Or is that an EU issue and therefore not in practice open to challenge?
AIUI VAT on DVDs is 3% in Luxembourg so I suspect it's an EU issue, what I don't get is why that can't be challenged as arguably the contract has been resold to a UK company. I can see the argument that says if the product comes directly from LX or is downloaded from a server in LX it's legitimate. But if the product say a DVD or book is made in the UK, warehoused in the UK and delivered in the UK and has never left the country that to me should have full VAT. But this now goes into obscure areas of commercial and EU law and hence my quip their competitive adbantage is they can afford better lawyers than small shops or HMG for that matter !
"Point of order: RETAIL not rental. Been to Woolies or HMV recently?"
I apologize...I am multi-tasking here...Woolies especially had a lot of problems, not just Amazon stealing their market share in DVD's.
However, the internet via streaming, will seriously effect physical DVD market and in the both the US and here, Amazon don't have anywhere near a monopoly on that nor the replacement for the CD, music downloads / streaming.
Again, I'm not arguing about how they got to this stage, just that people always say well that Amazon they is making massive % returns, like Starbucks, Google, etc...when it isn't currently true.
They might have land grabbed a lot of the physical CD / DVD sector, but now that rug is being seriously plugged with all the music, tv and movie streaming services.
FU... am very well aware of the relative profitability of Amazon. The ROIC is better than the margins - Amazon Marketplace is a cute scam and their tax trick is the most effective of all.
I usually make points with a reason rather than just churning out party lines like our missing friend.
"Amazon killed the DVD retail market by shipping their product from Luxembourg and avoiding the need to charge VAT. They used this to undercut prices, keeping the upside for themselves and causing significant job losses and social costs for the UK tax payer."
I don't deny that, I said so in my post, they have aggressively targeted the market...I am just saying that it is wrong to lump them with many of the other players when it comes to talking about making massive returns.
Analysis of mark-up on a cup of Starbucks, shows a very healthy margins (which don't seem to reflect in the profits declared in the country of sale)....as stated in the piece, Amazon is operating on razor thin margins.
As for killing the rental DVD market...you are having a laugh right? The rental DVD market has been killed by the internet!!!
Point of order: RETAIL not rental. Been to Woolies or HMV recently?
My issue is that they have won market share (fair play) by taking advantage of a 20% price differential due to a tax arbitrage. Why does the government favour one business model over another?
This is an argument for a common EU tax rate.
or for VAT being charged at point of sale, not by the company location.
Well, the centre and centre-right press are practically unanimous in their scathing criticism of Ed's new plan. I think this could be a defining moment.
why should internet cos. have a stable market, access to consumers, an enforceable system of law and payment and the pass the cost of providing this infrastructure on to their competitors through tax avoidance ?
They shouldn't, but Charles specifically stated we should find a way of charging them the equivalent of business rates - which to me seems to simply penalise them for finding a more efficient business model than bricks & mortar in the high street. Their competitors should either move online or find a business model that encourages both footfall and in-store spend. The high street of he future will probably be half to a quarter the size it is now, there seems to be no point trying to keep it going.
Charles imo is simply stating the obvious, if the tax base were bigger becuause internet multi nats were paying their VAT in this country then rates and other taxes would be lower. These guys arguably haven't worked out a more efficient business model, merely a better tax scam.
He isn't stating the obvious - he wants companies that have no shops to pay rates on them - the ultimate in restrictive practices - the issue of where a company has its headquarters re corporation tax is a different matter.
Was more of an example. This is a tax that causes serious hardship for SMEs that are based in the UK and creates a loophole that is exploited by multinationals to create a competitive advantage.
I don't see how that is in the UK's national interest.
"Point of order: RETAIL not rental. Been to Woolies or HMV recently?"
I apologize...I am multi-tasking here...Woolies especially had a lot of problems, not just Amazon stealing their market share in DVD's.
However, the internet via streaming, will seriously effect physical DVD market and in the both the US and here, Amazon don't have anywhere near a monopoly on that nor the replacement for the CD, music downloads / streaming.
Again, I'm not arguing about how they got to this stage, just that people always say well that Amazon they is making massive % returns, like Starbucks, Google, etc...when it isn't currently true.
They might have land grabbed a lot of the physical CD / DVD sector, but now that rug is being seriously plugged with all the music, tv and movie streaming services.
Amazon Marketplace is a cute scam
How is Amazon Marketplace a scam? They're just allowing 3rd parties to sell thru their website, and charging commission on the sale.
I don't think I've seen anybody add, to the fact that Ed is inadvertently planning to turn the lights out, that he's also planning on losing over £1bn tax from the energy companies
BBC @ 10 fairly unhelpful for Ed I thought: images of lights going out and a big emphasis on economic uncertainty. I'm quite surprised how negative it is...
BBC1 10pm also emphasised the saving of £120.
I wonder if quite a few floating voters (ie people a bit unsure whether this is a good or bad idea) may be thinking "is it worth screwing up the economy for £120?"
"Amazon killed the DVD retail market by shipping their product from Luxembourg and avoiding the need to charge VAT. They used this to undercut prices, keeping the upside for themselves and causing significant job losses and social costs for the UK tax payer."
I don't deny that, I said so in my post, they have aggressively targeted the market...I am just saying that it is wrong to lump them with many of the other players when it comes to talking about making massive returns.
Analysis of mark-up on a cup of Starbucks, shows a very healthy margins (which don't seem to reflect in the profits declared in the country of sale)....as stated in the piece, Amazon is operating on razor thin margins.
As for killing the rental DVD market...you are having a laugh right? The rental DVD market has been killed by the internet!!!
Point of order: RETAIL not rental. Been to Woolies or HMV recently?
My issue is that they have won market share (fair play) by taking advantage of a 20% price differential due to a tax arbitrage. Why does the government favour one business model over another?
This is an argument for a common EU tax rate.
or for VAT being charged at point of sale, not by the company location.
EU membership has always been more imports than exports for the UK.
"Point of order: RETAIL not rental. Been to Woolies or HMV recently?"
I apologize...I am multi-tasking here...Woolies especially had a lot of problems, not just Amazon stealing their market share in DVD's.
However, the internet via streaming, will seriously effect physical DVD market and in the both the US and here, Amazon don't have anywhere near a monopoly on that nor the replacement for the CD, music downloads / streaming.
Again, I'm not arguing about how they got to this stage, just that people always say well that Amazon they is making massive % returns, like Starbucks, Google, etc...when it isn't currently true.
They might have land grabbed a lot of the physical CD / DVD sector, but now that rug is being seriously plugged with all the music, tv and movie streaming services.
Amazon Marketplace is a cute scam
How is Amazon Marketplace a scam? They're just allowing 3rd parties to sell thru their website, and charging commission on the sale.
I should have said trick rather than scam. It's a good way to get operating leverage from their fulifment capabilities
Been really busy today (and not finished yet) but on my way to some hole near Glasgow this morning I heard the first 40 minutes of the R5 phone in. The BBC could not find a single person, either member of the public or expert, who thought Ed's energy policy was anything less than insane. Not just mistaken but insane.
I genuinely believe he has made a huge strategic error on this even if Labour get a post conference bounce. Think back to 94-97. Blair and Brown went on a charm offensive of the city and business. You can trust us. We are comfortable with the extremely rich (excessively so in TB's case as it turned out). These were very reassuring noises. Ken Clarke was a popular and very successful Chancellor, the tories (despite black Wednesday) led on economic competence. But there were lots of reasons for a change of government and new Labour did not look frightening, not at all.
Labour under Ed Miliband are just not going to be trusted with the economy. His instincts are statist and dangerous. When Gordon Brown looks Mr safe by comparison you have a serious problem.
Been really busy today (and not finished yet) but on my way to some hole near Glasgow this morning I heard the first 40 minutes of the R5 phone in. The BBC could not find a single person, either member of the public or expert, who thought Ed's energy policy was anything less than insane. Not just mistaken but insane.
There's also a lot of public cynicism, people nowadays assume that the politician is offering a bribe and that they will end up paying in some other way.
Would people like their bills cut? Yes. Do they believe Labour are offering a real cut? Maybe not.
Been really busy today (and not finished yet) but on my way to some hole near Glasgow this morning I heard the first 40 minutes of the R5 phone in. The BBC could not find a single person, either member of the public or expert, who thought Ed's energy policy was anything less than insane. Not just mistaken but insane.
There's also a lot of public cynicism, people nowadays assume that the politician is offering a bribe and that they will end up paying in some other way.
Would people like their bills cut? Yes. Do they believe Labour are offering a real cut? Maybe not.
“Here we have a serious politician, standing up and saying what he said which I think at a stroke torpedoed any chance that any of that investment will happen between now and the next election,” Mr Woodford said.
“If Centrica and SSE cannot make any money supplying electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down.
“[This policy] is economic vandalism at a time when this country needs all the help it can get. It is insane, not least it is also fundamentally dishonest to suggest to the electorate that electricity and gas prices are where they are because of profiteering by the companies." Other than suggesting that Ed is a serious politican this is spot on and I think the majority of us know it.
Am slightly surprised that the story doesn't seem to make the front pages of the FT at all!
Charles,I put the FT in the red camp because ,labour say tories must return 5m donation and osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
Am slightly surprised that the story doesn't seem to make the front pages of the FT at all!
Charles,I put the FT in the red camp because ,labour say tories must return 5m donation and osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
The ICAP story is very much a City one, although not sure it is really anything new. Banker's bonuses - while it plays badly in the public mind is (a) important [should the EU regulate wages in an industry they don't understand) and (b) will probably be a positive for the FT's readership...
@DavidL - Well, quite. I can understand why people didn't believe me (or pretended not to believe me) when I made exactly the same points, but anyone who knows anything about the world of finance - and especially utilities - will know who Neil Woodford is.
Put your hands over your ears, Labour supporters. Say la-la-la. Go on, let's hear it - you're going to trash Neil Woodford's reputation next, aren't you?
Or are there any sane Labour supporters (other than Lord Mandelson and Dan Hodges) left out there, who might scratch their heads and ask: 'Hang on, was this such a bright idea after all?'?
Interesting but not surprising that Labour's poll lead has risen.
As an owner of shares in several of the utilities I confess to feeling some shame as the dividends sometimes hit 7% while consumers suffered rising energy and utility prices.
It's just electoral suicide for the Tories and Lib Dems to defend our bloated and protected dividends.
Severn Trent recently refused a bid at 25% above it's current value from a consortium who wanted their guaranteed dividend. I recently doubled my money on Northumbrian Water after they were taken over for the same reason
It's win win for the shareholders and very unfortunate for customers who in reality have no options. Yet bizarrely it's the shareholders who the Libs and Tories have gone to the barricades for
Been really busy today (and not finished yet) but on my way to some hole near Glasgow this morning I heard the first 40 minutes of the R5 phone in. The BBC could not find a single person, either member of the public or expert, who thought Ed's energy policy was anything less than insane. Not just mistaken but insane.
There's also a lot of public cynicism, people nowadays assume that the politician is offering a bribe and that they will end up paying in some other way.
Indeed, no need for the Tories to defend the energy companies - and as good free market believers, we shouldn't be - just keep pointing out the Ed and Labour had 13 years to sort out the energy market and only succeeded in doubling the amount consumers paid. Why should we believe Ed will be any better the second time round.
...osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
It is not madness for George to mount a legal challenge on bonuses. He has already won (at least to interim judgement stage) five cases he has brought to the ECJ on new EU rules affecting the UK Financial Sector.
Consider the following table for Bankers in the EU27 earning more than €1 million p.a.
Metric Total Banking United Kingdom Rest of EU
Number of high earners 2,436 (77%) 739 (23%)
Number of high earners 1,000 (64%) 572 (36%) identified as staff
Total fixed 784,505,169 (64%) 450,733,574 (36%) remuneration
Total variable 2,717,967,709 (76%) 854,660,840 (24%) remuneration
Total variable remuner- 1,777,969,114 (79%) 483,059,286 (21%) -ation deferred in Year
Total discretionary 10,642,642 (50%) 10,839,705 (50%) pension benefits
Average Total remuner- 1,437,797 1,766,434 -ation per Individual
If the treasury were to lose the income tax revenues on UK bankers it would have to find more than £3 billion of incomes elsewhere to tax. That will be you paying more taxes, Tyke.
Interesting but not surprising that Labour's poll lead has risen.
As an owner of shares in several of the utilities I confess to feeling some shame as the dividends sometimes hit 7% while consumers suffered rising energy and utility prices.
It's just electoral suicide for the Tories and Lib Dems to defend our bloated and protected dividends.
Severn Trent recently refused a bid at 25% above it's current value from a consortium who wanted their guaranteed dividend. I recently doubled my money on Northumbrian Water after they were taken over for the same reason
It's win win for the shareholders and very unfortunate for customers who in reality have no options. Yet bizarrely it's the shareholders who the Libs and Tories have gone to the barricades for
@DavidL - Well, quite. I can understand why people didn't believe me (or pretended not to believe me) when I made exactly the same points, but anyone who knows anything about the world of finance - and especially utilities - will know who Neil Woodford is.
Put your hands over your ears, Labour supporters. Say la-la-la. Go on, let's hear it - you're going to trash Neil Woodford's reputation next, aren't you?
Or are there any sane Labour supporters (other than Lord Mandelson and Dan Hodges) left out there, who might scratch their heads and ask: 'Hang on, was this such a bright idea after all?'?
They are committed now. Backing off will make them look ridiculous (I know, I know).
It is something of an achievement, I suppose, as LOTO to do almost as much damage to essential investment in energy as he achieved in 2.5 years as SoS. Not one to be particularly proud of though.
...osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
It is not madness for George to mount a legal challenge on bonuses. He has already won (at least to interim judgement stage) five cases he has brought to the ECJ on new EU rules affecting the UK Financial Sector.
Consider the following table for Bankers in the EU27 earning more than €1 million p.a.
Metric Total Banking United Kingdom Rest of EU
Number of high earners 2,436 (77%) 739 (23%)
Number of high earners 1,000 (64%) 572 (36%) identified as staff
Total fixed 784,505,169 (64%) 450,733,574 (36%) remuneration
Total variable 2,717,967,709 (76%) 854,660,840 (24%) remuneration
Total variable remuner- 1,777,969,114 (79%) 483,059,286 (21%) -ation deferred in Year
Total discretionary 10,642,642 (50%) 10,839,705 (50%) pension benefits
Average Total remuner- 1,437,797 1,766,434 -ation per Individual
If the treasury were to lose the income tax revenues on UK bankers it would have to find more than £3 billion of incomes elsewhere to tax. That will be you paying more taxes, Tyke.
You may be right Avery,but that wasn't how it was reported on the tv news,they made it look like tories sticking up for they rich banker friends(especially on sky news with randall),tories losing media war again I'm afraid.
Andy - be interesting to see whether the Tories actually confirm their membership rather than the backhanded pass of an old number from a staffer at CCHQ
...osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
It is not madness for George to mount a legal challenge on bonuses. He has already won (at least to interim judgement stage) five cases he has brought to the ECJ on new EU rules affecting the UK Financial Sector.
Consider the following table for Bankers in the EU27 earning more than €1 million p.a.
Metric Total Banking United Kingdom Rest of EU
Number of high earners 2,436 (77%) 739 (23%)
Number of high earners 1,000 (64%) 572 (36%) identified as staff
Total fixed 784,505,169 (64%) 450,733,574 (36%) remuneration
Total variable 2,717,967,709 (76%) 854,660,840 (24%) remuneration
Total variable remuner- 1,777,969,114 (79%) 483,059,286 (21%) -ation deferred in Year
Total discretionary 10,642,642 (50%) 10,839,705 (50%) pension benefits
Average Total remuner- 1,437,797 1,766,434 -ation per Individual
If the treasury were to lose the income tax revenues on UK bankers it would have to find more than £3 billion of incomes elsewhere to tax. That will be you paying more taxes, Tyke.
I wish you were in favour of Tory strategy Avers. Actually, maybe you are.
No, it's not a great post. It's a spectacularly, mind-bogglingly stupid post.
- What's the total return for utility shares compared with other shares?
- It's not the shareholders shafted by Ed which is the main problem (although it is a problem - these are largely pension funds and pensioners or others wanting a steadyish income without taking a speculative position), it's the effect on desperately-needed investment.
No, it's not a great post. It's a spectacularly, mind-bogglingly stupid post.
- What's the total return for utility shares compared with other shares?
- It's not the shareholders shafted by Ed which is the main problem (although it is a problem - these are largely pension funds and pensioners or others wanting a steadyish income without taking a speculative position), it's the effect on desperately-needed investment.
Interesting but not surprising that Labour's poll lead has risen.
As an owner of shares in several of the utilities I confess to feeling some shame as the dividends sometimes hit 7% while consumers suffered rising energy and utility prices.
It's just electoral suicide for the Tories and Lib Dems to defend our bloated and protected dividends.
Severn Trent recently refused a bid at 25% above it's current value from a consortium who wanted their guaranteed dividend. I recently doubled my money on Northumbrian Water after they were taken over for the same reason
It's win win for the shareholders and very unfortunate for customers who in reality have no options. Yet bizarrely it's the shareholders who the Libs and Tories have gone to the barricades for
You cannot judge the value of a share on its dividend policy alone.
An investor's return is a combination of capital appreciation plus dividend yield.
Energy companies will want to attract long term investors to finance highly capital intensive investments so will pursue a policy of paying relatively high dividends.
With their 'blue chip' status and non-discretionary business (consumers are always going to need energy supplies), energy companies try to make their shares more like fixed income bonds (i.e. the shares offer low but steady capital growth and high dividends).
Threatening to mess around with the industry and its revenue streams is creating an impact on the value of energy company shares which is exactly the opposite of that expected by investors. Hence the capital flight today from UK energy stocks.
Shareholders will have lost a lot of money today and will be far more cautious in entrusting their funds to the UK energy sector in future.
And the net effect in the market will be higher cost of capital, less investment and employment, and, higher consumer prices or blackouts.
If Labour can freeze domestic energy prices, why can't they freeze motor fuel prices?
I'll assume that's a serious question.
If you freeze prices by dictat and the then the underlying price of oil goes up, then petrol stations will simply shut down. The market for oil is a global one, so as Shell petrol stations will no longer be able to afford to profitably sell petrol, they will simply stop selling petrol.
If you freeze prices by offering a subsidy (so you send money to Shell so that they can afford to pay the higher prices), then the country goes bust. Let us imagine the price of oil rose by $25. In this case, the daily susbidy required would be approximately $40m, and the annual one $15bn. But it'll be worse than that: if your subsidy causes prices to be significantly lower than in neighbouring countries, then people will smuggle it. (People in Iran have historically smuggled petrol into Turkey to take advantage of price differentials.) So, you might end up with a bill of $40bn. And don't get me started on what would happen if the price were to rise by $100...
I'm sorry, but this is a serious matter. There's a need to attract between £100bn and £200bn of investment over the next few years. This is not some silly bit of froth, this is absolutely fundamental to the UK's prosperity. It's hard to imagine anything else - except maybe the gilts market - where Ed could have done so much damage by one stupid, stupid speech. Of course he will do a massive U-turn on this, but even when he does the damage will not be repaired, because confidence has been lost. There will always now be a nagging doubt, and the one thing you don't put up with if you're investing tens of billions is a nagging doubt. If he wanted some idiotic populist policy, why the hell couldn't he go for something harmless like premier league rights?
I'm sorry, but this is a serious matter. There's a need to attract between £100bn and £200bn of investment over the next few years. This is not some silly bit of froth, this is absolutely fundamental to the UK's prosperity. It's hard to imagine anything else - except maybe the gilts market - where Ed could have done so much damage by one stupid, stupid speech. Of course he will do a massive U-turn on this, but even when he does the damage will not be repaired. If he wanted some idiotic populist policy, why the hell couldn't he go for something harmless like premier league rights?
Of course he will do a massive U-turn on this - before or after 2015 GE ?
I'm sorry, but this is a serious matter. There's a need to attract between £100bn and £200bn of investment over the next few years. This is not some silly bit of froth, this is absolutely fundamental to the UK's prosperity. It's hard to imagine anything else - except maybe the gilts market - where Ed could have done so much damage by one stupid, stupid speech. Of course he will do a massive U-turn on this, but even when he does the damage will not be repaired. If he wanted some idiotic populist policy, why the hell couldn't he go for something harmless like premier league rights?
Richard, has there been serious consideration of effectively moving some of the "policy costs" and tax that the energy companies say makes up much of our bills to the general taxation?
I'm sorry, but this is a serious matter. There's a need to attract between £100bn and £200bn of investment over the next few years. This is not some silly bit of froth, this is absolutely fundamental to the UK's prosperity. It's hard to imagine anything else - except maybe the gilts market - where Ed could have done so much damage by one stupid, stupid speech. Of course he will do a massive U-turn on this, but even when he does the damage will not be repaired. If he wanted some idiotic populist policy, why the hell couldn't he go for something harmless like premier league rights?
As spending on Sky Sports is discretionary, that wouldn't have done anything to tackle spiralling general household bills. As you know. Excuse the pun, but the Sky won't fall in.
Richard, has there been serious consideration of effectively moving some of the "policy costs" and tax that the energy companies say makes up much of our bills to the general taxation?
I don't think so, but I could be wrong on that. Bear in mind that highish prices are partly by design, to encourage better efficiency in energy use. That might be a big mistake, of course.
@DavidL - Well, quite. I can understand why people didn't believe me (or pretended not to believe me) when I made exactly the same points, but anyone who knows anything about the world of finance - and especially utilities - will know who Neil Woodford is.
Put your hands over your ears, Labour supporters. Say la-la-la. Go on, let's hear it - you're going to trash Neil Woodford's reputation next, aren't you?
You do sound a bit overwrought, if I may say so. He's a fund manager who has a lot of shares in Centrica which have lost some value. I'm neither surprised he's upset, nor inclined to take him as a disinterested observer. We don't have hyperinflation and a price freeze for 20 months is not the apocalypse that he suggests.
It might be more interesting to hear the Conservative view. They're very quiet. There seem to be three possible positions:
(1) They favour energy prices going up in 2015-17 so as to provide money for investment, gauranteed supply, dividends for widows, and so on - implicitly the position of many here, who say they fear terrible consequences if the increases are blocked.
(2) They hope in a passive sort of way that the prices won't go up but are happy to leave it to the market, after all what business is it of the Government whether energy is expensive or not, except as a matter of detached interest? That seems the default conservative view - but is it what they in fact are going to say?
Comments
The answer is to make sure our tax laws make it profitable for people to set up Internet businesses and sell to, er, Luxemburg I suppose, and hopefully bigger places.
Ed Miliband, knowing he has the electorate on his side, has chucked a hand-grenade into the cosy and powerful world of Big Business/Tory Party/Energy Companies.
At the moment, he's sitting back and chuckling at their panic, waiting to see how they respond.
Brave, and great fun to watch.
http://www.telegraph.co.uk/earth/energy/9490712/Energy-companies-overcharge-customers-by-600m.html
http://www.newstatesman.com/2013/09/ukip-are-our-cousins-and-we-want-them-back
http://en.wikipedia.org/wiki/Chernobyl_disaster
http://www.independent.co.uk/news/world/the-most-honest-cities-in-the-world-8839046.html?action=gallery&ino=1
UK Treasury in legal challenge to EU bonus cap:
The UK Treasury has launched a legal challenge against European Union (EU) plans to cap bankers' bonuses.
http://www.bbc.co.uk/news/business-24273838
The prepay meter is awful and I hate it, but it's not really unfair.
You also are not going to build 200k homes by shafting the very folk with the wherewithal and know how to do it.
http://www.politicshome.com/uk/article/85466/the_daily_mail_thursday_26th_september_2013.html
I usually make points with a reason rather than just churning out party lines like our missing friend.
I don't see how that is in the UK's national interest.
Blue team - Daily mail,Telegraph,Guardian,Times
Red team - FT ,independent
http://www.politicshome.com/uk/article/85462/the_independent_thursday_26th_september_2013.html
Still they won't turn their fire on Labour.
Madness.
I wonder if quite a few floating voters (ie people a bit unsure whether this is a good or bad idea) may be thinking "is it worth screwing up the economy for £120?"
I genuinely believe he has made a huge strategic error on this even if Labour get a post conference bounce. Think back to 94-97. Blair and Brown went on a charm offensive of the city and business. You can trust us. We are comfortable with the extremely rich (excessively so in TB's case as it turned out). These were very reassuring noises. Ken Clarke was a popular and very successful Chancellor, the tories (despite black Wednesday) led on economic competence. But there were lots of reasons for a change of government and new Labour did not look frightening, not at all.
Labour under Ed Miliband are just not going to be trusted with the economy. His instincts are statist and dangerous. When Gordon Brown looks Mr safe by comparison you have a serious problem.
CON 32%
LAB 41%
LD 8%
UKIP 11%
Progressives 49%
Tory/UKIP 43%
Would people like their bills cut? Yes. Do they believe Labour are offering a real cut? Maybe not.
Normal conference bounce, comrades.
Doesn't seem much of a post-conference bounce to me.
It is even less than Clegg achieved after the Lib Dem conference.
Free Market Democrats 51%
“Here we have a serious politician, standing up and saying what he said which I think at a stroke torpedoed any chance that any of that investment will happen between now and the next election,” Mr Woodford said.
“If Centrica and SSE cannot make any money supplying electricity to the retail market then they won’t supply it. The lights will go off, the economy will shut down.
“[This policy] is economic vandalism at a time when this country needs all the help it can get. It is insane, not least it is also fundamentally dishonest to suggest to the electorate that electricity and gas prices are where they are because of profiteering by the companies."
Other than suggesting that Ed is a serious politican this is spot on and I think the majority of us know it.
Love bomb is the way forward. You scratch our back, we'll scratch yours.
Cam's pay for care scandal -
http://www.politicshome.com/uk/article/85472/daily_mirror_thursday_26th_september_2013.html
Put your hands over your ears, Labour supporters. Say la-la-la. Go on, let's hear it - you're going to trash Neil Woodford's reputation next, aren't you?
Or are there any sane Labour supporters (other than Lord Mandelson and Dan Hodges) left out there, who might scratch their heads and ask: 'Hang on, was this such a bright idea after all?'?
As an owner of shares in several of the utilities I confess to feeling some shame as the dividends sometimes hit 7% while consumers suffered rising energy and utility prices.
It's just electoral suicide for the Tories and Lib Dems to defend our bloated and protected dividends.
Severn Trent recently refused a bid at 25% above it's current value from a consortium who wanted their guaranteed dividend. I recently doubled my money on Northumbrian Water after they were taken over for the same reason
It's win win for the shareholders and very unfortunate for customers who in reality have no options. Yet bizarrely it's the shareholders who the Libs and Tories have gone to the barricades for
Indeed, no need for the Tories to defend the energy companies - and as good free market believers, we shouldn't be - just keep pointing out the Ed and Labour had 13 years to sort out the energy market and only succeeded in doubling the amount consumers paid. Why should we believe Ed will be any better the second time round.
...osbornes madness of a legal challenge on bank bonuses,day after ed was telling ,party of the well off. ;-)
It is not madness for George to mount a legal challenge on bonuses. He has already won (at least to interim judgement stage) five cases he has brought to the ECJ on new EU rules affecting the UK Financial Sector.
Consider the following table for Bankers in the EU27 earning more than €1 million p.a. If the treasury were to lose the income tax revenues on UK bankers it would have to find more than £3 billion of incomes elsewhere to tax. That will be you paying more taxes, Tyke.
twitter.com/UKIP/status/382961966861807616
They hit 30,000 on 12th July.
twitter.com/UKIP/status/355682905919467524
And there's this
http://www.telegraph.co.uk/earth/energy/9490712/Energy-companies-overcharge-customers-by-600m.html
It is something of an achievement, I suppose, as LOTO to do almost as much damage to essential investment in energy as he achieved in 2.5 years as SoS. Not one to be particularly proud of though.
- What's the total return for utility shares compared with other shares?
- It's not the shareholders shafted by Ed which is the main problem (although it is a problem - these are largely pension funds and pensioners or others wanting a steadyish income without taking a speculative position), it's the effect on desperately-needed investment.
Still Ed's got 20 months to come up with more "bright" ideas. I don't suppose he will disappoint.
http://www.betfair.com/exchange/politics/market?id=1.101416490
http://www.telegraph.co.uk/earth/energy/9490712/Energy-companies-overcharge-customers-by-600m.html
You cannot judge the value of a share on its dividend policy alone.
An investor's return is a combination of capital appreciation plus dividend yield.
Energy companies will want to attract long term investors to finance highly capital intensive investments so will pursue a policy of paying relatively high dividends.
With their 'blue chip' status and non-discretionary business (consumers are always going to need energy supplies), energy companies try to make their shares more like fixed income bonds (i.e. the shares offer low but steady capital growth and high dividends).
Threatening to mess around with the industry and its revenue streams is creating an impact on the value of energy company shares which is exactly the opposite of that expected by investors. Hence the capital flight today from UK energy stocks.
Shareholders will have lost a lot of money today and will be far more cautious in entrusting their funds to the UK energy sector in future.
And the net effect in the market will be higher cost of capital, less investment and employment, and, higher consumer prices or blackouts.
A sort of lose, lose for all.
http://blogs.independent.co.uk/2013/09/25/ed-miliband-gamma-minus
http://www.bbc.co.uk/sport/0/sailing/24274103
If you freeze prices by dictat and the then the underlying price of oil goes up, then petrol stations will simply shut down. The market for oil is a global one, so as Shell petrol stations will no longer be able to afford to profitably sell petrol, they will simply stop selling petrol.
If you freeze prices by offering a subsidy (so you send money to Shell so that they can afford to pay the higher prices), then the country goes bust. Let us imagine the price of oil rose by $25. In this case, the daily susbidy required would be approximately $40m, and the annual one $15bn. But it'll be worse than that: if your subsidy causes prices to be significantly lower than in neighbouring countries, then people will smuggle it. (People in Iran have historically smuggled petrol into Turkey to take advantage of price differentials.) So, you might end up with a bill of $40bn. And don't get me started on what would happen if the price were to rise by $100...
It might be more interesting to hear the Conservative view. They're very quiet. There seem to be three possible positions:
(1) They favour energy prices going up in 2015-17 so as to provide money for investment, gauranteed supply, dividends for widows, and so on - implicitly the position of many here, who say they fear terrible consequences if the increases are blocked.
(2) They hope in a passive sort of way that the prices won't go up but are happy to leave it to the market, after all what business is it of the Government whether energy is expensive or not, except as a matter of detached interest? That seems the default conservative view - but is it what they in fact are going to say?
(3) They favour the price freeze.
Which is it?
He's gambled big,he's got to go through with it.
If that's true, why isn't Miliband listening to Balls? It's not a controversial or odd opinion, it's a statement of the bleeding obvious.